Alabama changing method of tax collection on CNG

MONTGOMERY — Alabama is changing the way it taxes natural gas sold for transportation fuel in the state.

A measure passed by the Legislature and signed by Gov. Robert Bentley suspends a motor fuel road tax decal program for compressed natural gas vehicles that fuel in the state. The bill provides a tax holiday for natural gas used in vehicles and gives state agencies until Oct. 1, 2016, to develop a program to collect motor fuel road taxes at the point of purchase for compressed natural gas and liquefied natural gas.

A man fills his truck with compressed natural gas in Trussville last March as Jefferson County Commissioner Joe Knight looks on.file photo by Gary Lloyd

In addition to moving tax collection to the pump, the legislation also establishes standards for the sale and taxation of CNG and LNG based on energy equivalency with gasoline and diesel (5.66 pounds of CNG = 1 gasoline gallon equivalent, and 6.06 pounds of LNG = 1 diesel gallon equivalent).

Alabama legislators passed the bill 29-0 in the Senate and 101-0 in the House of Representatives. Bentley signed the measure into law April 9.

Under the former system, 300 CNG vehicles had purchased annual decals from the LP Gas Board at a rate of $75 to $150 per year. The decal program was difficult to enforce on out-of-state CNG vehicles and did not cover LNG vehicles. The new law will result in CNG and LNG being taxed in the same fashion as gasoline and diesel.

“This legislation creates a level playing field, and it also serves the state’s interest as more companies and individuals adopt alternative fuels,” said Phillip Wiedmeyer, president of the Alabama Clean Fuels Coalition. “It helps expand the market for alternative fuels and ensures the state doesn’t lose motor fuel tax as we decrease our reliance on foreign oil.”

A CNG pump at the Chevron station on Deerfoot Parkway in Trussville opened last March. The CNG dispensing station is the result of a public-private partnership. The Trussville Utilities Board loaned McCullough Oil $1.08 million for the project and will be repaid with part of the proceeds of CNG sales. The city of Trussville already uses CNG to operate 40 city vehicles, from police cruisers to dump trucks.